economy

With gasoline prices getting so high, people are crying out against "speculators" on Wall Street driving up the price of oil. Every time I've had someone give me that reason, I've tried to tell them how ignorant they are (somewhat politely, of course) of economics, supply and demand, and the commodities markets. Of course, I'm not an expert at commodities, so it was difficult for me to articulate it very well.

However, Jerry Tayler and Peter Van Doren offer up an excellent explanation.

What I normally hear from those who blame speculators for high gas prices amounts to "if the supply of oil drops by X%, then the price should only go up X%." With the conflict in Libya that we have unconstitutionally gotten involved in, about 2% of the global oil supply is threatened. Thus, by their logic, the price of gasoline should rise only 2% or so.

From CNN Money:

NEW YORK (CNNMoney.com) -- Fannie Mae requested another $8.4 billion from the federal government on Monday, saying that it expects its losses to continue because of trends in the housing and financial markets.

The government-controlled mortgage giant said it lost $11.5 billion in the first quarter of 2010, its 12th consecutive quarterly loss. In addition, Fannie paid out $1.5 billion dividend to the Treasury, which received stock after the government took it over in September 2008....

Fannie's request for more federal funds comes just four days after Fannie's twin Freddie Mac also asked for a handout - to the tune of $10.6 billion - after posting an $8 billion quarterly loss....

Obama has revealed his budget.  As expected, he proposes letting the Bush Tax Cuts on the "wealthy" expire while leaving those making under $200K untouched.  To "help stimulate" job growth, he also proposes a $5000 "tax credit" for employers each time they hire someone.  Some people are stupid enough to think that this makes some kind of business sense.

Let's take a look at what it costs to hire someone for a $20K per year salary.  In addition to the salary, the employer also has to pay unemployment tax (6.2% of the first $7000), social security (6.2%), and Medicare (1.45%).  This total comes out to $21,964.  This is just Federal requirements.  Add in State employment taxes, and you're easily looking at $24,000 total between salary and tax burden.  Hmm... so far that $5000 credit is making sense.